Success Stories Vipshop Japan Co., Ltd.

Chinese B2C EC site operator Guangzhou Vipshop Information and Technology Co., Ltd. (Vip.com) established a Japanese corporation, Vipshop Japan Co., Ltd. in Tokyo in January 2016. Vip.com is one of the three leading EC sites in China boasting more than 200 million registered members in the country. Its Japanese corporation is tasked with the important mission of developing local suppliers for the procurement of made-in-Japan products, which are popular in China.

Guangzhou Vipshop Information and Technology Co., Ltd. (Vip.com) was founded in Guangzhou, Guangdong in China in 2008, and has been rapidly growing with its signature flash sales* business model. As the largest flash sales site in China now, it collaborates with popular brand makers in various industries and provides customers with apparel, cosmetics, baby goods, interior products and more at affordable prices all the time. Vip.com was listed on the NY Stock Exchange (NYSE:VIPS) in 2012 and its total number of registered members in China exceeded 200 million at the end of 2016. Its sales for 2015 surpassed 40.2 billion yuan (about 750.1 billion yen) and the number of orders reached 200 million, all demonstrating its amazing speed in growth. China’s number three EC operator Vip.com has been engaged in the procurement and sale of products in China for Chinese consumers. In September 2014, it started the EC sales of international products (cross-border EC), and now sources products from established overseas locations—Taipei, Hong Kong, London, Milan, Paris, New York, Los Angeles, Sydney, Seoul and Tokyo.

* A method for the quick sale of brand products with special limited-time benefits such as discount rates.

Strength of China’s number three EC operator Vip.com

One reason for Vip.com’s rapid growth in a short period of time is its employment of a sustainable and innovative method for flash sales, allowing for the continuous provision of authentic original products at low prices. The rapid growth of China's EC business over a short time period led to inadequate vetting of brand product authenticity in distribution. This briefly became the object of public concern, resulting in a period in which consumer trust in Internet shopping deteriorated. A major reason cited for this was that so many small and medium-sized product suppliers were operating in China’s EC site industry that it was difficult to have them all adhere to compliance. It was during this time that Vip.com was established. The company sourced products directly from makers and exclusive agents, therefore completely shutting out counterfeit products. Within the rapidly growing scale of Chinese consumers, who presently number in the hundreds of millions, a sense of trust that “authentic original products are available” through Vip.com is taking hold, serving as a driving force for the growth of the company. Suppliers also have trust in the site operator as it procures and sells products on a regular basis, improving business relations and leading to a win-win situation for customers, suppliers and Vip.com.

Reason for foray into Japan and challenges

Vipshop Japan Co., Ltd. (Vipshop) General Manager Takenori Kobayashi referred to the reason for their incorporation in Japan, saying that as an important country accounting for about 25% of Vip.com’s procurement for its cross-border business, there was a need to conduct business closer to Japanese suppliers and to build a trustful relationship with them. “Until recently, Chinese tourists’ bakugai (shopping sprees) was a topic of conversation,” he says. “But this only applied to wealthy Chinese, a few million to tens of millions of people at most, representing a mere fraction of the total population. Vip.com estimates that there are about 500 million potential customers within China's middle class. As cross-border business prospers, middle class people will be able to more easily buy Japanese products in China, prompting Chinese consumers to discover the fine quality of Japanese products and become repeat customers. This will, later, lead to a new bakugai on the net, I believe.” He says that there is still great opportunity for high-quality Japanese products in the huge Chinese market. “Instead of renting site space to individual suppliers and relegating site-related operations to them as practiced by other cross-border EC site operators, Vip.com handles the entire process from product procurement to sales to distribution ourselves to ensure a steady supply of made-in-Japan products to Chinese consumers,” Mr. Kobayashi explains. “To that end, establishing a good relationship with Japanese suppliers becomes very important.”

Screen shot of Vip.com’s website

At the same time, he adds that while working in Japan, he is keenly aware of the company’s “lack of name recognition” in the international market. “Vip.com is the number three EC site in China, but currently it is little known in Japan,” Mr. Kobayashi says. “For Japanese people to know about our company’s business performance and the potential for China-based cross-border business, we will also focus on activities including presentations in seminars and public relations campaigns in the future.”

Business model in Japan

Vipshop considers its business model in Japan to be producing actual results and establishing trustful relationships through long-term transactions. Instead of merely procuring hit products in Japan at low prices and selling them off right away, it aims to proactively find potentially marketable products and develop them together in close collaboration with makers. Such deals made on a continuous basis will create trust and actual results, leading to the procurement of competitive products. From the standpoint of makers too, it helps avoid the risk of a drop in product price and maintain their brand image. “Our company’s strength is we can control the entire process from choosing the source of procurement to deciding the sales price,” Mr. Kobayashi stresses. “We haven’t seen a Chinese competitor yet doing business in Japan from such a perspective. Establishing sincere business relationships helps, indeed, to differentiate us from others.”
He further says, “We want to not only procure hit products but also outpace others in finding the next big hit in the future. Particularly in local areas, there are many excellent products peculiar to undeveloped areas. We want to sell such products in China, in hope of revitalizing these local areas.”

General Manager Kobayashi, VIPSHOP JAPAN Co., Ltd.

Mr. Kobayashi has a vision of making Vipshop a "part of the value chain of Japanese companies.” “Our company purchases products from Japanese suppliers and sells them in China using our own distribution network. So, from the viewpoint of the Japanese distribution side, now we are just like their customer. But I believe Japanese makers and retailers can expect further growth through overseas sales in the future. When that happens, we want them to use Vip.com as a company who shares the same growth vision as the Japanese distribution network and as a strategic partner for their overseas business development,” Mr. Kobayashi stresses. “Our company wants to work with Japanese companies, serving their globalization and playing the role of a bridge toward friendly relations between China and Japan.”

JETRO’s support

For the establishment of the Japanese subsidiary of Vip.com, the JETRO Invest Japan Business Support Center (IBSC) provided support including information related to company establishment, consultation on tax affairs, referral to service providers and market information. “JETRO contributed a great deal to the establishment of our company,” Mr. Kobayashi said. “Thanks to their detailed support, things went more smoothly than expected. We hope to be able to rely on them again if we expand business or start new business in Japan.”

(October 2016 interview)

Corporate history

Aug. 2008

Vip.com was founded in Guangzhou, Guangdong in China

Dec. 2008

Birth of EC site “Vipshop.com”

Aug. 2009

Number of registered members exceeded 0.2 million

Mar. 2012

Listed on the NY Stock Exchange (NYSE)

Nov. 2013

Birth of a new domain (Vip.com)

Sep. 2014

Start of an EC sales channel for foreign products

Jan. 2015

Total number of registered members exceeded 100 million

Q4 2016

Total number of registered members exceeded 200 million

Vipshop Japan Co., Ltd.

Establishment

2016

Business

Procurement of products for an EC shop (Vip.com) in China and support for Japanese companies participating in the EC shop